Larry Weber is chairman of W2 Group, a global marketing services ecosystem that helps CMOs in their new role as builders of communities. In 1987, he founded The Weber Group, which within a decade became the world’s largest technology public relations firm. The Interpublic Group of Companies purchased The Weber Group in late 1996, and in early 2000, Mr. Weber was named chairman and CEO of Interpublic’s Advanced Marketing Services Group. His second book, Marketing to the Social Web: How Digital Customer Communities Build Your Business, was published by Wiley &Sons in June 2007.

PERFORM: How should companies measure the effectiveness of their social media initiatives?

WEBER: I’d like to give marketers some context around social media first. There are two things that they have to measure. One is how they’re doing outside of their own walls – on the blogs, the e-communities, the organic search, the reputation aggregators that are talking about you. Part two would be measuring the conversations and the content that’s happening within your own enterprise social network or your own social site. Then the question is how to go about measuring. The traditional ways of measuring how many downloads, how many people have visited [the site], how many links – those are all endlessly measurable like anything on the Web. The area marketers need to get into is engagement. Are people spending quality time, are they asking the right questions, and are the dialogues really thoughtful around the products, the businesses, the categories, and the issues that are happening?

Ultimately, what marketers are going to want to know about are the conversations people are having about the brand and the products so that we know what’s foremost in their minds. Then you can start to measure how much your content and relevance are being discussed in other people’s blogs or the top e-communities around your category.

A big automotive company once told me, “Larry, we’re mentioned in 9,000 blogs. How do we even begin?” I said, “No, we’re going to analyze this.” We got it down to 15 blogs that were really critical to their reputation, and we started to understand what those conversations were before we introduced the company into the dialogue. Now we can easily step back and see that they’re considered part of those 15 communities. They are transparent – open about who they are and what they’re trying to accomplish. So, it’s about deciding first what it makes sense to measure, and then performing the actual measurement.

PERFORM: Marketers are tasked with tapping into this rich Internet community, and there are countless interactive tools they’re supposed to be leveraging, but they also need to show the CFO and CEO there’s real bottom-line value behind these efforts. How do you quantify the ROI of social media marketing?

WEBER: I think the real ROI is going to come as communities get richer and deeper, and it’s going to be difficult. I have a story about working hard to get a positive story on the front page of the Wall Street Journal for a client, and the CEO said to me, “Well, it’s fine, but how much more sales will I have?” So there’s a bit of a leap here in dealing with social media. I like to draw a comparison between the new social interfaces of sites that are going to help create environments and your favorite store. You don’t go into the store knowing how much you are going to spend. You might have a budget, but you go in because you like to see what’s new, you like to talk with the people that work there, the other customers, etc., and you end up buying a lot more anyway. That’s not going at it from a transactional point of view. The return on investment is going to be that continuing growing audience of target customers. An example is IBM and the small community it’s built for CIOs of healthcare companies.
It’s a closed community. They keep feeding it fresh content. They keep getting more CIOs to join, so they’re expanding their target base and you can easily grasp the return on that investment. You can see the community growing and asking more questions. Then you can see if they’re buying more of your software, your hardware or whatever else you are selling. But the first return on investment is getting a vibrant, thoughtful and very focused community base, and then you move into the monetization side.

This isn’t the performance marketing of pay-for-click. I think performance marketing is going to evolve into two channels. One is going to be the actual transaction, like pay-for-click or pay-for-call, search and so on. The other half is going to be the influencing of opinion through content, and that’s going to be more of the social side. You will be able to get the measurement and the return on investment by seeing the size of the community, the richness of the conversation and then, ultimately, you’ll see if you are selling more stuff.

PERFORM: With that in mind, are marketing departments able to sell this up the food chain so they can implement these initiatives?

WEBER: Absolutely. Part of the problem is that most of these large companies are still organized like they were in 1950, around marketing and the advent of broadcast and one-way media. Now what has to be shown and illustrated is that, as the social media grow, the average person is going to belong to seven or eight communities on a daily basis and a couple of those will be professional. If you’re a thought leader in your category, you’re going to want that customer to be part of your community. I think you can illustrate to the C-level that, in order to get closer to your customer, to create better care for that customer, this is the choice of communications they have. There are loads of examples of companies that are doing this: IBM, Cisco, Visa International, Genzyme. I think it’s very easy to explain to the C-level executives that you’re going to build communities and learn about customers and get closer to them.

PERFORM: Do you think these social media technologies are elevating the stature of marketing within organizations?

WEBER: Yes, I think they are. We’re going to need to elevate it anyway, based on just this simple fact: $110 billion in broadcast advertising will be spent on television this year, and the most conservative numbers I’ve seen from Forrester and Advertising Age say that 25 percent [of television viewed] is DVR or Tivo’d. That’s only going to increase. You can’t tell me that a chief marketing officer is going to go in to a CEO and say, “I just flushed 100 million bucks of my $400 billion budget into television,” when for $2 million you could’ve built the community that gets millions of people to come and learn about your products and your thinking and where you’re going. A lot of that money is going to shift to a marketing department organized around social media and marketing.

PERFORM: How can the level of online community engagement impact the company’s brand sales or profits?

WEBER: First of all, you need a definition of branding for the social media age. My definition is the dialogue you have with your customer. The stronger the dialogue, the stronger your brand. Brands, because of the digital nature of all of our communications now, are becoming living, breathing things, so they need to be nurtured regularly on an ongoing basis. It’s like the store that’s open 24 hours a day.

I actually think that the cost of marketing is going to go down if it focuses more on content and less around paid media. You will have better sales and profits because you’re attracting people that are legitimately interested in the specific things you’re offering. If you make fishing equipment that’s really good, and there’s a website called “Bass Fishing in Northern Idaho,” that’s fabulous, that’s the place you are going to want to go to talk to people about what you are selling, not to Sports Illustrated. It’s going to impact the way you sell and the way you profit, by looking at the social media landscape and really building it.

A perfect example of the next generation gobbling up these ideas is one of the guys that founded MySpace. He raised $300 million, and he’s buying every little social media site he can buy, like “Quilting in” and “Fishing in Northern” and “Bowling in Florida.” It sounds boring, but that’s where companies are going to have to communicate – not mass media but, instead, highly focused media, and that will bring returns in a big way.

PERFORM: How is measuring Web 2.0 and the viral nature of social media the same or different from measuring Web 1.0?

WEBER: That’s easy. Web 1.0 is very transactional. You had that first generation of what I call “the quick economy.” That’s eBay, Amazon, Google. Now we have the e-social economy, with MySpace, Facebook, You- Tube. In less than 36 months, they became three of the eight most-visited sites in the world. That’s amazing. The measuring there is going to have to be around time spent, around segments, because now in these kind of sites, and even on corporate sites, it’s segmented by content, by topic. So if you want to measure content and its impact on sales, it’s going to have to measure engagement, conversations that are happening, not transactions. For now, there are the basic tools like Technorati that at least let you know what’s happening, what conversations are going on and where they’re going. And then there’s new software, architected tools like Neighborhood America and Prospero for building communities. There are increasingly more listening research tools too, such as Kavaa.

So the marketer has to be attuned to new applications and new tools that are going to go deeper than the surface tools we have right now like Technorati. It’s a good beginning, but there’s a long way to go. Remember, when TV advertising began 75 years ago, it was just some guy holding up a box of detergent saying, “This gets your clothes cleaner,” and that was about it. That evolved into all the complex advertising we have today, and this will move much more rapidly. We’re in the first inning, so to speak, but I would argue that marketers that don’t pay attention to this now do so at their peril.

PERFORM: Are you hearing in your conversations that this is a cause for panic? Is it a time of excitement? How is this changing the way marketers approach their jobs?

WEBER: I call it pandemonium, the true definition of which is “ordered chaos,”but it’s scary because it’s change. When I have to be blunt with people, I sometimes say, “Madison Avenue is the Berlin Wall of marketing.” At some point it’s going to break down because it’s not where the audiences are and they don’t want to see ads in that way anymore. It’s all going to be more permission-based and social in nature, and it’s not something to be afraid of. It’s actually very logical. It’s just that we have got to change.

We’re going to have to reorganize our departments, we’re going to have to reorganize our spending, we’re going to have to understand that the customers are in control, and we’re going to have to make our marketing fit that. It’s black and white; it’s an evolution. Paid media will be less important, but it’s still going to be there. And paid search is going to be important, and it will continue to grow. But so will the whole social link to communities of interest around what your company does.

Performance is going to be a combination of creativity and content, and the actual paid media and numbers. That’s a good angle for looking at social media and marketing, yet not as flaky as it sounds. It’s where the people are going to be, and that’s where you have to engage them.